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Plain Money ideas

Mid-year checkup

UntitledMid-year is a great time to do a financial checkup. You can multiply spending, income and tax totals by 2 to get an estimate of what the whole year will look like financially for you. You can also check on your income tax withholding to see if it’s about right.

If you’re paid regularly, just take a look after your June 30 or July 1 paycheck and multiply your “income to date” and “federal tax withheld to date” by 2. That gives you a rough estimate of what your year-end income and taxes look like. If your year-end income looks a lot higher than last year’s, you can have more tax withheld. That increases the probability that you’ll get a refund instead of having to pay more when you file taxes next year.

Here are a few more points to keep in mind:

  • This exercise works best if you’re paid a regular salary. It’s much less valuable if your pay goes up and down a lot.
  • If you want to get a little more precise with your withholding calculation, there’s a handy calculator at TurboTax.
  • If you want to make sure you don’t owe penalties or interest when you file your taxes next year, check out the Safe Harbor Rule, so that you can remain OK even without a good estimate of the next six months’ worth of income.
  • Although a big tax refund might look nice, keep in mind that such a refund is vulnerable to identity theft. Caution would argue for not letting so much money accumulate in tax withholdings.
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Plain Money ideas

Yet another reason

flashboysThere’s always another reason for small investors to stay out of the individual stock investing game, but this point sometimes produces an unusual twist. From watching 60 Minutes or Today, you may think small investors are being disadvantaged by high-frequency trading. They might or might not be. Here’s an author who thinks they’re not hurt. But an incidental point in the article is raised by a former chief investment office at my favorite mutual fund company. Here’s the key point: “Rather than decrying speed traders, Sauter praised the benefits it had brought to him and his clients. By his estimate, speed traders helped him save him more than a $1 billion a year.” Improvements in the technical efficiency of markets help those who buy and hold index funds.

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Plain Money ideas

Nice item for cable-cutters

eraseGetting rid of cable TV is one great way to boost a household budget. Not only do you lose the cable bill — you also may find yourself spending less time in front of the screen and more time in the real world. But if you think you would miss your cable package’s included DVR, here’s a valuable ally in cutting the cable: the DVR+ from ChannelMaster. Combined with an antenna, it picks up local TV in high definition and records whatever your specify. Here’s a useful review with all the details, and here’s an excellent support thread at AVSforum.

Here’s a post on a predecessor to the DVR+ (I still have mine — in fact, the only reason I haven’t gotten a DVR+ is that my old box is still working so well.)

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Plain Money ideas

That $1 million goal

How much money do you have to save up to be “rich”? Let’s try the nice round number of $1 million. That puts you in the top 10 percent of the wealth distribution. OK, that’s rich.

But a column in The New York Times says wait, $1 million isn’t enough to comfortably retire on. Whoa! Nine of ten Americans have less than enough! If this is really true, I suggest the problem lies in defining what is “enough,” not in any failure to accumulate wealth.

Or, to put it another way: If your definition of “enough” is so high that 90 percent of us can’t get there, you’re just assuming way too much spending, spending, spending to buy stuff, stuff, stuff. (Look it up: “Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions.”)

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Plain Money ideas

Wolf repellent

There’s quite a bit of stir about the film, Wolf of Wall Street. I haven’t seen the film, but I have noticed that critics — after talking about its technical quality and hard-R-rated content — feel obliged to say that it makes some kind of important statement about the immorality of financial markets in the U.S.

And naturally, this led me to an important point: Nobody who followed a sound financial plan was victimized by the anti-hero of the film, the Wolf of Wall Street, the criminally immoral financial entrepreneur. Only those trying to get rich quickly would fall for a classic pump-and-dump scheme. So here is your wolf repellent: Buy and hold index funds.

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Plain Money ideas

That “one card”

Is investing really so simple that a complete plan could fit on one card? It is, according to Harold Pollack. Here’s the card (click for enlargement):

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Actually, it’s even simpler than that: “buy and hold index funds,” after getting your finances in order so that you have some money to save. Here’s a little detail on how the card stacks up:

  • The first line talks about maxing your 401(k) or equivalent — great advice, especially for all dollars saved that generate an employer match.
  • Those “inexpensive, well-diversified mutual funds”? The most inexpensive and most diversified are index funds. And that strategy means “not buying and selling individual securities.” More of the same shows up below when the card says to pay attention to fees and avoid actively managed funds — again, automatically taken care of if you buy and hold index funds.
  • “Save 20% of your money” and “pay your credit card balance”? That’s a reasonable goal for a percentage and good advice on credit cards.
  • Maximize tax-advantage savings vehicles? That’s the first point again.
  • Make financial advisor commit to a fiduciary standard? Sure, get a good advisor when you need one, but up until that point just buy and hold index funds.
  • And finally, promote social insurance programs? That’s a reasonable position to take, with a couple of things to keep in mind: (1) It won’t personally affect your wealth, because of (realistically) your inability to affect national legislation; and (2) “Promoting social insurance programs” doesn’t mean you have to promote badly run social insurance programs or social insurance programs that are doomed to collapse.

Finally, what’s missing from the card? The most important things in life, such as faith and friendship and love. “Promoting social insurance programs” is a poor secular substitute for any of those things.

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Plain Money ideas

Simpli Home: recommended

What do you get when you order “some assembly required” furniture on a site such as amazon? In my case, I recently had a superior experience with a glass-door bookcase from Simpli Home. The product is shipped knocked down to fit the cartons, but has a neat cam system that holds everything together well when it’s assembled. I also had a great customer service experience when I ran into a snag with assembly. Recommended!

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Plain Money ideas

The Plainmoney Hunger Scrounge

The Hunger Scrounge is a youth activity designed to help us identify with people who do not have enough money to afford as much food as they would like. It tests the resourcefulness of the participating youth as they attempt to shop and cook on a highly limited budget.

This version of the Hunger Scrounge was originated at the Beaver Creek Church of the Brethren, Bridgewater, Virginia, in 2007. However, we do not claim originality, as this exercise was inspired by a larger Brethren Volunteer Service activity and we assume that other churches and organizations have done similar activities.

Church groups will want to include prayer and a blessing for the meal. We believe this activity could be adapted to raise awareness of hunger in non-church groups also, however.

Here are the rules of the Hunger Scrounge:

(Typical timeframe is 4 p.m.-7 p.m.)

1. Youth and advisers will meet and, depending on the numbers of youth, they will either pick their own teams or will be assigned to teams.

2. Each participating youth member brings 35 cents. (Change will be available.) Teams will pool their money for shopping. As you shop, remember that you must pay for the food and sales tax within the 35 cent per person limit.

3. After briefing and team assignments, we will carpool over to the grocery store, leaving about 4:30 p.m. Teams will have about 30 minutes to shop and pay for their items. Use a shopping handbasket and not a cart; this will help you navigate the aisles and, if you wish, keep other teams from getting ideas from your purchases.

4. In the store, youth teams must show respect to other shoppers and store management. This includes not taking apart any packaged foods that are not labeled for individual resale (for example, individual cups in a carton of applesauce).

5. Each team will turn in a receipt showing items purchased. There are penalties for exceeding the 35-cent limit per team member. Teams may share items with other teams, but must agree in advance how many cents of each purchase price will be claimed by each team.

6. Teams will have until about 6 p.m. to cook their meals. During cooking, the youth advisers will circulate and observe teams to aid with determining of winners.

7. Teams may use salt, pepper, water and cooking utensils from the church kitchen. Teams may also use no-stick cooking spray and olive oil that will be provided. No other food items from the kitchen may be used. No snacking on kitchen items is permitted.

8. After we eat, prepared food that has not been served may also be shared at that time. Winners, as determined by the judges, will be announced. To close the activity, we will have a sharing time in which people talk about their experience and what they learned.

9. Although youth advisers are eligible to purchase and cook a 35-cent per person meal, they are not eligible for any of the prizes.

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Plain Money ideas

Believe Warren Buffet

If you don’t believe me about investing, then how about Warren Buffett? Here’s advice from the Sage of Omaha, the world’s best-known investor, in USA Today:

“Doing reasonably well investing in stocks,” Buffett says, “is very, very easy.”

Here’s how he says investors should play the investing game:

“Buy an index fund, preferably over time, so you end up owing good businesses at a reasonable average price,” says Buffett. “And that is all you have to do.”

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Plain Money ideas

Truly “sophisticated” investors buy and hold

I recently saw a questionnaire from a major financial firm. The idea was good — get the client to fill out this form and then the adviser can make suitable recommendations. But I saw one multiple-choice question that was sadly lacking one answer. Paraphrasing (to avoid copyright concerns), it asked whether I was:

  1. a beginning investor
  2. moderately experienced and therefore comfortable with mutual funds, etc.
  3. knowledgeable, someone who has traded individual stocks or bonds
  4. someone sophisticated, who has “traded stock options, exercised stock rights and warrants”

Do you see what’s missing? It’s an answer (5), “someone so sophisticated that I know how stupid it is to engage in answers (3) and (4).” The more you know about investments, the more your understand the power of buying and holding index funds.